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Dy. Commissioner of Income Tax – Central Circle-36, Mumbai Versus M/s Ackruti City Ltd. and Asstt. Commissioner of Income Tax – Central Circle-36, Mumbai Versus M/s Ackruti City Ltd., Mumbai

2016 (4) TMI 998 - ITAT MUMBAI

Penalty u/s 271(1)(c) - AO recomputed the deduction u/s 80IB(10) - reduction in the value of stock-in-trade to the tune of 10% on the ground that the building constructed were held as stock-in-trade and were leased out during the year - Held that:- CIT(A) had dealt with this issue in great detail and rightly deleted the penalty by accepting the contention of the assessee who relying on the decision of the Hon’ble Supreme Court in the case of CIT vs. Reliance Petroproducts (2010 (3) TMI 80 - SUPR .....

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ticulars of income. Thus we uphold the order of CIT(A) deleting the penalty levied by the AO by dismissing the appeal of the revenue. - Decided in favour of assessee - I.T.A. No.5355 to 5359/Mum/2012, I.T.A. No.4346/Mum/2013 - Dated:- 15-3-2016 - SHRI AMIT SHUKLA, JM AND SHRI RAJESH KUMAR, AM For The Appellant : Shri S S Kemwal For The Respondent : Shri Anuj Kisnadwala ORDER PER RAJESH KUMAR, AM : All these appeals are directed against the common order dated 11.6.2012 passed by the ld.CIT(A)-41, .....

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- 1. Whether on the facts and in the circumstances of the case and in law, Ld. CIT(A) was correct in deleting penalty of ₹ 28,92,183/- levied u/s 271(1)(c) on account of allocation of common expenses towards projects eligible for deduction u/s 80IB(10) of the IT Act, 1961 without appreciating the fact that expenses of eligible project have been booked into non eligible projects resulting in reduction of taxable income. 2. Whether on the facts and in the circumstances of the case and in law .....

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te development and slum rehabilitation. The case of the assessee was selected for scrutiny and statutory notices under section 143(2) r.w.s 153A were issued and served upon the assessee. The assessment was completed vide order dated 27.2.2004 u/s 143(3) of the Act at ₹ 2,44,58,100/-. A search and seizure operation was conducted under section 132 in the premises of Akruti Group of cases, including the assessee on 10.8.2006 and the assessment was completed u/s 143(3)(153A on 30.12.2008 at a .....

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de us/ 143(3) r.w.s. 153A of the Act various additions were made and the matter was appealed before the CIT(A) who deleted the additions made except two additions first of ₹ 73,12,726/- for expenses allocated to projects for which the deduction u/s 80IB(10) was made and second d of ₹ 3,53,115/- being reduction claimed @ 10% of Stock in trade. In response to the query raised by the AO , the assessee submitted that the total expenses debited to the profit and loss account from the asse .....

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lved on which the penalty was levied by the AO was deduction of 10% of the stock-in-trade. The AO asked the assessee to explain the provisions made while reducing its value of stock-in-trade and further asked the assessee to explain that since the value of real estate had appreciated manifold what was the logic of writing off 10% of stock-in-trade i.e building. The assessee submitted before the AO that land and building constituted stock-in-trade in the business of the assessee as it was engaged .....

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and suppressing the income by rejecting the submissions of the assessee and holding that the assessee had tried to manipulate profits by maneovering the expenses in such a manner so that non-taxable income u/s 80IB (10) would go up and the taxable income from non 80IB(10) came down and thus manipulated the books of account to avoid tax liability. Similarly, the AO held that the reduction of 10% in stock-in-trade which was alleged to be with a view to comply with the correct accounting and taxat .....

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ance was made accordingly. The Ld. CIT(A) has decided this issue by accepting the stand of the assessee that only 80.92% of the common expenses were allowable to 80IB(10) projects and he allowed relief to the extent of ₹ 46 lakhs of further addition made in the hands of the assessee. This order of the CIT(A) was accepted by the assessee and the department. On the second issue in which the assessee has claimed a reduction in value of stock-in-trade @ 10% of the cost of the stock-in-trade. T .....

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s not accepted the arguments of the appellant and levied penalty u/s. 271(1)(c) of the IT. Act on the basis of reasons given above. During the appellate proceedings, the AR of the appellant has submitted that the assessee has claimed expenses and despite relating to allocation of common expenses towards 80IB(10) projects was accepted on the basis of the CIT(A) by the department and the assessee. Similarly, on the second issue of disallowance of reduction of 10% claimed in stock-in-trade, the ass .....

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articulars mean that the details supplied in the return or not accurate, not exact or correct, not according to truth or erroneous. It was held that a mere making of the claim which is not sustainable in law by itself will not amount to furnishing inaccurate particulars regarding the income of the assessee. The Hon'ble High Court in CIT v. Indian Metals & Ferro Alloys Ltd. has held that "the word "conceal" is derived from the Latin word "concolare" which implies .....

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not been defined in the Act, but the natural meanings of the expression "concealment" are to keep from being seen, found, observed, or discovered". It would therefore follow that the expression concealment of income, in its natural sense and grammatical meaning, implies an income is being hidden, camouflaged or covered up so as cannot be seen, found, observed or discovered. The expression "inaccurate" refers to "not in conformity with the fact or truth" and tha .....

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do with furnishing of inaccurate particulars of income In our considered view, raising a legal claim, even if it is ultimately found to be legally unacceptable, cannot amount of (sic) furnishing of inaccurate particulars of income". In the present case, the assessee has claimed expenses which were re-allocated as per-decision of CIT(A) which was accepted by the assessee and the department. Thus, the appellant has made claim which was modified in appeal means that it was a debatable issue. B .....

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uestion arises whether the assessee' has concealed the facts or Submitted inaccurate particulars of income? The answer is given by Hon'ble Supreme Court in case of Reliance Petro products by holding that merely the claim made by the assessee which is not accepted by the AO is not a case of concealment and submitting of inaccurate particulars of income as per the provisions of section 271(1)(c). In view of these facts, it is held that it was not a case of concealment of income or submitti .....

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ating more expenses towards those projects which were not covered by the said provisions. The assessee had been manipulating its accounts thereby suppressing the taxable income from non 80IB(10) projects and inflating the income of those projects to which the provisions of section 80IB(10) were applicable and accordingly , the claimed deduction. The ld. DR further submitted that during the course of assessment proceedings, the assessee, in reply to the query raised by the AO submitted the detail .....

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he AO observed that such deduction was claimed with malafide intention to reduced the income as real estate the prices of land and building were spiriling with the passage of time. In view of these facts, the ld. DR finally submitted that the penalty was rightly imposed on the assessee for furnishing inaccurate particulars of income by way of suppressing the taxable profit and inflating the tax free profit u/s 80IB(10). 5. The ld. AR vehemently submitted before us that full and true disclosure w .....

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2004-05. The ld. AR submitted that the common expenses represented the cost not identifiable to any specific project which comprises of general administrative expenses, interest expenditures and depreciation etc and were claimed accordingly. The ld. AR further referred to the principle laid down in Accounting Standard-7 by submitting that the assessee had not allocated any of such expenses to any projects since financial year 1998-99. The assessee had during the year completed certain projects .....

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The Institute Of Chartered Accountants Of India which deals with valuation of inventory at cost or market price whichever is lower and accordingly, the assessee followed it stock-in-trade at cost less 10%. This had appended because the assessee leased out various building in Phase-I, II, III and MIDC, Ancheri (E) which were held as stock-in-trade and not sold immediately. Since there was considerable time gap in the completion and selling these buildings, the assessee valued these building at c .....

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since all the facts relating to non-allocation of expenses were duly stated and disclosed and were inconformity with the stand of the assessee accepted by the revenue and also as per the various accounting Standards. In respect of reduction in stock in trade to the extent of 10% was revenue neutral as ultimately upon selling the stock in trade the true profits would be accounted automatically which proved the genuineness of assessee s claim and thus no penal action u/s 271(1)( c ) was called fo .....

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accepted by the department in the assessment years 2002-03, 2003-04 and 2004-05. During the course of scrutiny proceedings, the AO called for the details of various allocable expenses which were filed by the assessee from assessment year 2001-02 to 2007-08 amounting to ₹ 10,34,31,192/- the details whereof as given by the assessee are as under:- AY Total allocable expenses Allocable to 80IB(10) projects a B 2001-02 13,829,000 7,312,726 2002-03 23,853,235 9,131,987 2003-04 38,110,760 11,207, .....

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nd that the building constructed were held as stock-in-trade and were leased out during the year. Since the time gap between completion of construction and selling was huge therefore in order to account for normal wear and tear in the value of building the assessee reduced of 10% of the stock value which was claimed to be according to AS-2 issued by ICAI. The AO imposed the penalty of ₹ 30,31,840/- on the ground that the assessee had furnished inaccurate particulars of income by not alloca .....

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